How Does Divorce or Separation Affect the Mortgage
Divorces and separations happen. And it can sometimes get messy, especially if you own property together. So, what happens with a joint mortgage after you divorce?
Let’s take a look.
Who gets the property in a divorce?
No one person gets the property in a divorce. In theory, the assets should be split equally between the two divorcing spouses. However, in reality it’s never that simple especially if children are involved.
You do have a number of options though. We’ll look at a few of them.
Sell up and move out
The easiest way to split your home between you or to avoid any issues with who stays and who pays, is to sell up and move out.
It enables to you pay off the mortgage, release your money and secure any equity you have in the property. This can then be used to buy another home.
The problem with this approach is when you have children who want to continue living in the family home. Selling up and moving out doesn’t cater to this.
One owner buyout
Another option you have is for one owner to buy the other one out. This means that one person can stay in the family home with the kids for example. To ensure everything is done fairly, you’ll need to get the house valued – this will mean that the person buying the other out not only gets the money back that they put in, but also any equity they’ve accrued in the property.
Continue to pay your existing joint mortgage
With this option, both of you will continue to own the property although one person will remain living in it with the children. Sometimes in this case the courts impose a ruling that it can’t be sold until the children are 18 – this is called a “Mesher” order.
With this option, you can come to an agreement on who pays the mortgage, whether you both still contribute or just the person living there. Either way, if any mortgage payments are missed, it will impact the credit score of both owners regardless of who is living there and who isn’t.
Make it part of the settlement
As part of your divorce settlement, you can agree that one person keeps the house. The other person will secure other assets from the settlement to an equivalent value.
What happens to your joint mortgage after a divorce?
Nothing really happens to your joint mortgage after a divorce. The terms of your mortgage will have been agreed for you to both own equity in the property and to be jointly liable to pay the mortgage. It isn’t reliant on you being married or not.
What you do with it is up to you. As mentioned above, there are a few options to consider, from selling it or one person living there with the kids. You may want to speak to your solicitor about your options before you do anything.
If you’re keeping the house and one person is moving out it will be easier for them to get another mortgage if their name is taken off the mortgage. However, when the house is sold they will still want to get their share – it’s important to have an appropriate legal agreement drawn up to reflect this.
Should you sell your house in a divorce if you’re in negative equity?
If your home is in negative equity when you divorce, you should try and hold onto it. Negative equity is when your home has dropped significantly in value (often after a property crash), so much so that if you sold it you wouldn’t raise enough to pay off your mortgage.
Selling it then means you’re still liable to pay back the mortgage company the difference. How you do this would then have to be agreed as part of the divorce settlement. A better option would be holding onto it and one person buying the other out – this would also be cheaper if the value has dropped.
What happens if you’re not on the property’s title deeds?
If your ex-spouse bought the property before you married and you’re not on the title deeds then you likely won’t have any claim to the property. But if you bought it together after you married and your name isn’t on the deeds, it will usually be considered a joint asset by the courts. This means you should have some claim on it.
The best way to avoid this scenario is to always ensure both names are on the title deed when a property is bought jointly.
Getting a mortgage after a divorce
It shouldn’t be a problem to get a mortgage after a divorce if you’ve sold your property. If your name is still on the joint mortgage of your marital home, it can be much harder to get a new mortgage. In fact, some lenders will instantly refuse your mortgage application if you’re already connected to another mortgage. It can also become problematic if your ex-spouse has missed any repayments on the mortgage on your marital home.
